-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AjhHaXz8xJFhXKuFjxHYHir27X48f7QZCzcL1YjQ7N4QrbbgvBY6sBwtaceiZdwc 25E03gyDv4j6uLyByK9kJA== 0000898173-99-000033.txt : 19991117 0000898173-99-000033.hdr.sgml : 19991117 ACCESSION NUMBER: 0000898173-99-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: O REILLY AUTOMOTIVE INC CENTRAL INDEX KEY: 0000898173 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO & HOME SUPPLY STORES [5531] IRS NUMBER: 440618012 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21318 FILM NUMBER: 99753964 BUSINESS ADDRESS: STREET 1: 233 S PATTERSON CITY: SPRINGFIELD STATE: MO ZIP: 65802 BUSINESS PHONE: 4178622674 MAIL ADDRESS: STREET 1: 233 SOUTH PATTERSON CITY: SPRINGFIELD STATE: MO ZIP: 65802 10-Q 1 O'REILLY AUTOMOTIVE, INC. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ____________________ Commission file number 0-21318 O'REILLY AUTOMOTIVE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Missouri 44-0618012 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 233 South Patterson Springfield, Missouri 65802 - -------------------------------------------------------------------------------- (Address of principal executive offices, Zip code) (417) 862-6708 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Common stock, $0.01 par value - 25,366,464 shares outstanding as of September 30, 1999 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES FORM 10-Q Quarter Ended September 30, 1999 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED) Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 7 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 9 PART II - OTHER INFORMATION ITEM 5 - OTHER INFORMATION 9 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 9 SIGNATURE PAGE 10 EXHIBIT INDEX 11 PART I Financial Information ITEM 1. Financial Statements O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1999 1998 ------------- ------------ (Unaudited) (Note) (In thousands, except share data) Assets Current assets: Cash $ 2,729 $ 1,728 Short-term investments 500 500 Accounts receivable, net 33,187 27,580 Amounts receivable from vendors 21,579 26,660 Inventory 288,823 246,012 Refundable income taxes -- 3,026 Deferred income taxes 788 2,838 Other current assets 2,696 2,538 ----------- ----------- Total current assets 350,302 310,882 Property and equipment 260,550 210,207 Accumulated depreciation 51,257 39,256 ----------- ----------- 209,293 170,951 Other assets 21,751 11,455 ----------- ----------- Total assets $ 581,346 $ 493,288 =========== =========== Liabilities and shareholders' equity Current liabilities: Note payable to bank $ 5,000 $ 5,000 Accounts payable 79,592 66,737 Income taxes payable 8,865 -- Other current liabilities 34,308 22,091 Current portion of long-term debt 12,808 8,691 ----------- ----------- Total current liabilities 140,573 102,519 Long-term debt, less current portion 50,433 170,166 Other liabilities 631 2,209 Shareholders' equity: Common stock, $.01 par value: Authorized shares- 90,000,000 Issued and outstanding shares - 25,366,464 shares at September 30, 1999 and 21,349,700 at December 31, 1998 253 213 Additional paid-in capital 220,149 82,658 Retained earnings 169,307 135,523 ----------- ----------- Total shareholders' equity 389,709 218,394 ----------- ----------- Total liabilities and shareholders' equity $ 581,346 $ 493,288 =========== ============
NOTE: The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See notes to condensed consolidated financial statements. Page 3 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------ 1999 1998 1999 1998 ----------- ----------- ----------- ----------- (In thousands, except per share data) Product sales $ 208,401 $ 172,784 $ 570,912 $ 456,295 Cost of goods sold, including warehouse and distribution expenses 120,400 103,439 330,130 270,080 Operating, selling, general and administrative expenses 65,770 53,910 182,679 146,199 ----------- ----------- ----------- ----------- 186,170 157,349 512,809 416,279 ----------- ----------- ----------- ----------- Operating income 22,231 15,435 58,103 40,016 Other expense (564) (1,955) (3,417) (4,770) ----------- ----------- ----------- ----------- Income before income taxes 21,667 13,480 54,686 35,246 Provision for income taxes 8,255 5,119 20,901 13,394 ----------- ----------- ----------- ----------- Net income $ 13,412 $ 8,361 $ 33,785 $ 21,852 =========== =========== =========== =========== Basic income per share data: Net income per common share $ 0.53 $ 0.39 $ 1.41 $ 1.03 =========== =========== =========== =========== Weighted average common shares outstanding 25,346 21,256 23,987 21,209 =========== =========== =========== =========== Income per common share-assuming dilution: Net income per common share-assuming dilution $ 0.52 $ 0.38 $ 1.39 $ 1.00 =========== =========== =========== =========== Adjusted weighted average common shares outstanding 25,589 21,883 24,343 21,744 =========== =========== =========== ===========
See notes to condensed consolidated financial statements. Page 4 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, ---------------------------------- 1999 1998 ----------- ----------- (In thousands) Net cash provided by (used in) operating activities $ 33,483 $ (16,698) ----------- ------------ Investing activities: Purchases of property and equipment (54,138) (37,335) Acquisition of Hi-Lo Automotive, Inc., net of cash acquired -- (49,296) Proceeds from sale of property and equipment 6,775 2,627 Payments received on notes receivable 1,061 -- Advances made on notes receivable (70) -- Other -- (455) ----------- ----------- Net cash used in investing activities (46,372) (84,459) ----------- ----------- Financing activities: Borrowings on note payable to bank 5,000 -- Payments on note payable to bank (5,000) -- Proceeds from issuance of long-term debt 84,013 145,241 Payments on long-term debt (201,976) (46,217) Net proceeds from secondary offering 124,890 -- Proceeds from issuance of common stock 6,963 1,432 ----------- ----------- Net cash provided by financing activities 13,890 100,456 ----------- ----------- Net increase (decrease) in cash 1,001 (701) Cash at beginning of period 1,728 2,285 ----------- ----------- Cash at end of period $ 2,729 $ 1,584 =========== ===========
See notes to condensed consolidated financial statements. Page 5 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 1999 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of O'Reilly Automotive, Inc. and Subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 1999, are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 2. Debt The Company has unsecured credit facilities totaling $175 million. The facilities are comprised of a $125 million five-year revolving credit facility which includes a $5 million sub-limit for the issuance of letters of credit and a $50 million five-year term loan facility. These credit facilities are guaranteed by the subsidiaries of the Company and currently bear interest at the London Interbank Offered Rate ("LIBOR") plus 0.50%. The Company is required to meet various financial covenants as defined in the credit agreement. 3. Secondary Offering On March 31, 1999, the Company completed a public offering of 3,340,000 shares of common stock, 3,000,000 of which were issued by the Company resulting in net proceeds of $106.8 million. A portion of the proceeds was used to repay a significant amount of the outstanding indebtedness of the Company under its credit facility. The remaining portion of the proceeds will be used to fund future expansion. On April 7, 1999, the Company issued 501,000 shares of common stock related to the Company's portion of the over-allotment option resulting in net proceeds to the Company of $17.9 million. 4. Business Acquisition Effective January 31, 1998, the Company acquired all of the outstanding common shares of Hi-Lo Automotive, Inc. and its subsidiaries ("Hi/LO") for $49.3 million or $4.35 per common share. This acquisition has been accounted for as a purchase by recording the assets and liabilities of Hi/LO at their estimated fair values at the acquisition date. The excess of net assets acquired over the purchase price, which totaled approximately $9.7 million, has been applied as a reduction to the acquired property and equipment. The consolidated results of operations of the Company include the operations of Hi/LO from the acquisition date. Unaudited Pro Forma consolidated results of operations assuming the purchase was made at the beginning of each period are shown below: (amounts in thousands, except per share data)
Nine months ended September 30, ----------------------------------- 1999 1998 ------------- ------------- Net sales $570,912 $474,064 Net income $33,785 $25,505 Net income per share $1.41 $1.09
Page 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Unless otherwise indicated, "we," "us," "our" and similar terms, as well as references to the "Company" or "O'Reilly" refer to O'Reilly Automotive, Inc. and its subsidiaries. Results of Operations Product sales for the third quarter of 1999 increased by $35.6 million, or 20.6%, over product sales for the third quarter of 1998. Product sales for the first nine months of 1999 increased by $114.6 million, or 25.1% over product sales for the first nine months of 1998. This is due to the opening of 14 net, new O'Reilly stores during the last quarter of 1998 and the opening of 50 net, new stores during the first three quarters of 1999, in addition to a 11.6% increase in comparable store product sales (O'Reilly stores increased 6.7% and HiLo stores increased 19.0%). At September 30, 1999, we operated 541 stores compared to 477 stores at September 30, 1998. Gross profit increased 26.9% from $69.3 million (or 40.1% of product sales) in the third quarter of 1998 to $88.0 million (or 42.2% of product sales) in the third quarter of 1999. Gross profit for the first nine months increased 29.3% from $186.2 million (or 40.8% of product sales) in 1998 to $240.8 million or (42.2% of product sales) in 1999. The increase in gross profit margin was attributable to continued improvement to our product acquisition programs, some of which were related to conversions of product lines in the Hi-Lo stores. Operating, selling, general and administrative expenses ("OSG&A expenses") increased $11.9 million from $53.9 million (or 31.2% of product sales) in the third quarter of 1998 to $65.8 million (or 31.6% of product sales) in the third quarter of 1999. OSG&A expenses increased $36.5 million from $146.2 million (32.0% of product sales) in the first nine months of 1998 to $182.7 million (or 32.0% of product sales) in the first nine months of 1999. The dollar amount increase in OSG&A expenses resulted from the addition of team members and resources in order to support the increased level of our operations. Other expense decreased by $1.4 million in the third quarter of 1999 compared to the third quarter of 1998 and decreased by $1.4 million for the first nine months of 1999 compared to the first nine months of 1998. The overall decrease in other expense is due to the repayment of a significant amount of our debt in the first quarter of 1999, thereby reducing interest expense. Our estimated provision for income taxes increased from 38.0% of income before income taxes in the third quarter and the first nine months of 1998 to 38.1% and 38.2%, respectively in the same periods in 1999. The increase in the effective income tax rate was primarily due to changes in the mix of taxable income among the states in which we operate. Principally, as a result of the foregoing, net income increased from $8.4 million or 4.8% of product sales in the third quarter of 1998 to $13.4 million or 6.4% of product sales in the third quarter of 1999 and from $21.9 million or 4.8% of products sales in the first nine months of 1998 to $33.8 million or 5.9% of product sales in the first nine months of 1999. Liquidity and Capital Resources Net cash of $33.5 million was provided by operating activities for the first nine months of 1999 as compared to $16.7 million of cash used by operating activities for the first nine months of 1998. This increase was principally the result of improved operating results and increases in income taxes payable, offset by increases in inventory and accounts receivable. These increases are the result of the addition of new stores and increased sales levels in existing and newly opened stores and the results of product line conversions. Net cash used in investing activities has decreased from $84.5 million in 1998 to $46.4 million in 1999 primarily due to the acquisition of Hi/LO in early 1998, partially offset by the proceeds of the sale of property and equipment. Cash provided by financing activities has decreased from $100.5 million in the first nine months of 1998 to $13.9 million in the first nine months of 1999. The decrease was primarily due to the substantial reduction of debt with the funds generated by the secondary offering in the first quarter of 1999, as well as the scheduled principal payments on debt. Additionally, cash provided by operations has funded growth without having to increase our use of the credit facilities. Aside from the 50 net, new stores opened in the first nine months of 1999, we plan to open an additional 30 net new stores during the 4th quarter of 1999. The funds required for such planned expansions will be provided by operating activities, short-term investments and the existing and available bank credit facilities. Page 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONT.) Management believes that the cash expected to be generated from operating activities, existing cash and short-term investments, existing bank credit facilities and trade credit will be sufficient to fund our short and long-term capital and liquidity needs for the foreseeable future. Inflation and Seasonality We have been successful, in many cases, in reducing the effects of merchandise cost increases principally by taking advantage of vendor incentive programs, economies of scale resulting from increased volume of purchases and selective forward buying. As a result, we do not believe our operations have been materially affected by inflation. Our business is seasonal to some extent primarily as a result of the impact of weather conditions on store sales. Store sales and profits have historically been higher in the second and third quarters (April through September) of each year than in the first and fourth quarters. Year 2000 Readiness Disclosure We have appointed an internal Year 2000 issue project manager and remediation team and have adopted a four phase approach of assessment, remediation, testing and contingency planning. The scope of the project includes our review of all internal software, hardware and operating systems and an assessment of the risk to our business posed by any lack of vendor preparedness with respect to the Year 2000 issue. We have completed the initial assessment of all internal systems, are progressing with the remediation and testing phases, and have begun contingency planning for information technology systems. We believe that this approach of assessment (including prioritization by business risk), remediation (including conversions to new software), testing of necessary changes, and contingency planning will minimize the business risk of the Year 2000 issue from internal systems. We utilized internal personnel to correct, replace and test our software for the Year 2000 project. The total cost of the project was approximately $200,000. Of the total project cost, approximately $25,000 represented the purchase of replacements or upgrades of software and hardware, which were capitalized. We expensed the remaining portion of the project cost as incurred during 1999. We have established ongoing communications with all our significant vendors to monitor their progress in resolving their issues related to the Year 2000 issue. Many of such vendors have informed us that they are making substantial progress in resolving their Year 2000 issue. However, the most likely worst case scenario for us would entail failure of one or more of our significant vendors to continue operations (even temporarily) following transition to the year 2000. We have also contacted suppliers of products significant to our operations containing embedded chips to monitor their progress in resolving issues related to the Year 2000 issue. No material issues have been identified to date as a result of these contacts. We cannot guarantee that our business partners will adequately address issues related to the Year 2000 issue in a timely manner or that the failure of our business partners to correct these issues would not have a material adverse effect on the Company. We have completed contingency plans to be used in the event of a business interruption caused by the Year 2000 issue for some, but not all, of our internal information technology systems. Such plans are being developed for some of our other systems. Elements of our contingency plans include switching vendors and utilizing back-up systems that do not rely on computers. Forward-Looking Statements Certain statements contained in this quarterly report on Form 10-Q are forward-looking statements. These statements discuss, among other things, expected growth, store development and expansion strategy, business strategies, future revenues and future performance. The forward-looking statements are subject to risks, uncertainties and assumptions including, but not limited to competitive pressures, demand for our products, the market for auto parts, the economy in general, inflation, consumer debt levels and the weather. Actual results may materially differ from anticipated results described in these forward-looking statements. Certain risks are discussed in Exhibit 99.1 hereto. Page 8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to market risk through derivative financial instruments and other financial instruments is not material. PART II - OTHER INFORMATION Item 5. Other information On November 8, 1999, the Company announced the declaration by its Board of Directors, at its third quarter meeting held Thursday, November 4, 1999, of a two-for-one stock split in the form of a 100% stock dividend to all shareholders of record of its common stock as of the close of business on November 15, 1999. Each shareholder entitled to the dividend will receive one additional share of the Company's common stock for every one share of common stock held. The Company anticipates that the additional shares resulting from the dividend will be made available to the shareholders on or about November 30, 1999. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: See Exhibit Index on page 11 hereof. (b) No reports on Form 8-K were filed by the Company during the quarter ended September 30, 1999. Page 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. O'REILLY AUTOMOTIVE, INC. November 15, 1999 /s/ David E. O'Reilly - -------------------------- ------------------------------------------ Date David E. O'Reilly, Chief Executive Officer November 15, 1999 /s/ James R. Batten - -------------------------- ------------------------------------------ Date James R. Batten, Vice-President of Finance and Chief Financial Officer Page 10 EXHIBIT INDEX Number Description Page - ------ ----------------------------------------------------- ----------- 3.3 Restated Articles of Incorporation, as amended 12 27.1 Financial Data Schedule 20 99.1 Certain Risk Factors, filed herewith. 21 Page 11 EX-3.3 2 RESTATED ARTICLES OF INCORPORATION, AS AMENDED Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following: 1. The name of the Corporation is O'Reilly Automotive, Inc. 2. An amendment to the Corporation's Restated Articles of Incorporation was adopted by the shareholders at a meeting duly held on May 4, 1999. 3. Section (a) of Article III of the Corporation's Restated Articles of Incorporation is deleted in its entirety, and the following is inserted in its place: ARTICLE III The aggregate number, class and par value of shares which the corporation shall have the authority to issue shall be ninety million (90,000,000) shares of common stock, par value $.01 per share and five million (5,000,000) shares of preferred stock, par value $.01 per share. 4. Of the 21,376,421 shares outstanding, all of such shares were entitled to vote on such amendment. 5. The number of shares voted for and against the amendment was as follows: 16,122,317 shares voted for the amendment 1,080,310 shares voted against the amendment 28,027 shares abstained from voting 6. The amendment changed the number of authorized shares having a par value, and the amount in dollars of authorized shares having a par value as changed is $950,000. The amendment did not change the number of authorized shares without par value. 7. The amendment does not provide for an exchange, reclassification or cancellation of issued shares, or a reduction of the number of authorized shares of any class. Page 12 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.) IN WITNESS WHEREOF, the undersigned, James R. Batten, has executed this instrument and its Secretary has affixed its corporate seal hereto and attested said seal as of the 20th day of July, 1999. O'REILLY AUTOMOTIVE, INC. CORPORATE SEAL By: /s/ James R. Batten ------------------------------------- Title: Vice-President of Finance/CFO ATTEST: /s/ Tricia Headley, Secretary - ----------------------------- STATE OF MISSOURI ) ) SS COUNTY OF GREENE ) I, Cynthia L. Bennett, a Notary Public, do hereby certify that on this 20th day of July, 1999, personally appeared before me James R. Batten, who being by me first duly sworn, declared that he is the Vice-President of Finance and CFO of O'Reilly Automotive, Inc., that he signed the foregoing document as Vice-President of the Corporation, and that the statements therein contained are true. /s/ Cynthia L. Bennett -------------------------------------- Notary Public My commission expires: January 28, 2003 (Attachment) Page 13 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.) RESTATED ARTICLES OF INCORPORATION OF O'REILLY AUTOMOTIVE, INC. Pursuant to the provisions of the General and Business Corporation Law of Missouri, we, the undersigned officers of O'Reilly Automotive, Inc., hereby execute the following Restated Articles of Incorporation of said corporation and state that the Restated Articles of Incorporation set forth below have been adopted by action duly taken pursuant to Section 351.106, R.S.Mo. 1986, as amended (by the vote in favor thereof by a majority of the outstanding shares entitled to vote). The original Articles of Incorporation of the corporation were filed in the office of the Missouri Secretary of State on August 15, 1957. The name under which the corporation was originally organized was Springfield Supply and Motor Parts, Inc. The incorporators of the corporation and the place of residence of each at the time of incorporation were George N. Lockridge, 6617 Wenonga Terrace, Kansas City, Missouri; Russell W. Baker, 417 West 59th Terrace, Kansas City, Missouri; and Daniel McDonald, 5441 Chadwick, Kansas City, Kansas. These Restated Articles of Incorporation correctly set forth without change the corresponding provisions of the Articles of Incorporation of the corporation as heretofore amended, and supersede the original Articles of Incorporation and all amendments thereto. ARTICLE I The name of this corporation is "O'Reilly Automotive, Inc." ARTICLE II The address of the corporation's registered office in the State of Missouri is 233 South Patterson, Box 1156, Springfield, Missouri, 65805 and the name of its registered agent is C. H. O'Reilly. ARTICLE III (a) The aggregate number, class, and par value of shares which the corporation shall have the authority to issue shall be thirty-five million (35,000,000) shares, which shall include thirty million (30,000,000) shares of common stock having a par value of one cent ($.01) per share and five million (5,000,000) shares of preferred stock having a par value of one cent ($.01) per share. (b) Upon the effectiveness of this Amendment to the Articles of Incorporation, and without any further action on the part of the corporation or its shareholders, each share of common stock, par value $0.50 per share, then issued and outstanding shall be changed and reclassified into 120.15353 fully paid and non-assessable shares of common stock, par value $0.01 per share, and holders of shares of common stock, par value $0.50, shall for all purposes be deemed holders of the number of shares of common stock, par value $0.01 per share, into which such shares shall have been changed and reclassified; provided, that no fractional shares of common stock, par value 0.01 per share, shall be issued pursuant to such change, and an amount of cash equal to the value of any fractional interest created thereby, based upon a valuation of $15.00 per share, shall be paid to a shareholder in lieu thereof. To reflect the change and reclassification provided above, each certificate representing shares of common stock, par value $0.50 per share, theretofore issued and outstanding shall, as soon as practicable after the effective date of this Amendment, be surrendered to the corporation, which as soon as practicable thereafter shall issue a new certificate representing the number of whole shares of common stock, par value $0.01 per share, equal to 120.15353 times the number of shares theretofore held. (c) The voting power of the corporation shall be vested in the holders of the common stock, who shall be entitled to one vote per share of common stock on all matters to be voted on by the shareholders, except to the extent voting rights are determined for holders of preferred stock by the Board of Directors in accordance with part (e) of this Article III. (d) The Board of Directors may cause shares of preferred stock to issued from time to time, in one or more series and for such consideration (not less than the par value of such shares to be so issued) as the Board of Directors may determine from time to time. Page 14 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.) (e) The Board of Directors shall determine the relative rights, preferences, and limitations of each series of preferred stock established pursuant to part (d) of this Article III, including, but not limited to, the following: O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - AMENDMENT OF ARTICLES OF INCORPORATION (cont.) RESTATED ARTICLES OF INCORPORATION (i) the number of shares constituting that series and its distinctive designation; (ii) the dividend rate whether dividends shall be cumulative, and, if so, from which date or dates and the relative rights of priority, if any, of the payment of dividends on shares of that series; (iii) whether that series shall have voting rights in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (iv) whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion privileges, including the designation of the securities into which such series may be converted, the conversion rate, and provisions for adjustment of the conversion rate upon the occurrence of such events as the Board of Directors shall determine; (v) whether or not the shares of the series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) whether the corporation shall establish a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; and (vii) the rights of the shares of that series in the event of the voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series. (f) No holder of any share of stock or other security of the corporation, either now or hereafter authorized or issued, shall have any preferential or preemptive right to acquire additional shares of stock or any other security of the corporation other than such, if any, as the Board of Directors may in its discretion from time to time determine pursuant to the authority conferred by these Articles of Incorporation of the corporation. (g) There shall be no right to cumulative voting in the election of directors. (h) Except as otherwise required by The General and Business Corporation Law of Missouri, whenever the holders of shares of stock of the corporation shall be entitled to vote as a class with respect to any matter, the affirmative vote of a majority of the outstanding shares of such class shall be required to constitute the act of such class. ARTICLE IV The number of directors of the corporation shall be that number that is fixed by, or in the manner provided in, the Bylaws of the corporation; provided, however, that the number of directors of the corporation shall not be less than three. Any changes in the number of directors shall be reported to the Missouri Secretary of State within thirty (30) calendar days of such change. Directors need not be shareholders of the corporation. The Board of Directors shall be divided into three classes, as nearly equal in number as possible, which shall be designated Class I, Class II and Class III. The term of office the initial Class I directors shall expire at the annual meeting of shareholders held in 1994; the term of office of the initial Class II directors shall expire at the annual meeting of shareholders held in 1995; and the term of office of the initial Class III directors shall expire at the annual meeting of shareholders held in 1996. At each annual meeting of shareholders held after 1993, the directors elected to succeed those whose terms then expire shall be elected for a term of three (3) years expiring at the third succeeding annual meeting thereafter. If the number of directors is changed, any increase or decrease in the number of directors shall be apportioned among the classes so that the number of directors in each class remains as nearly equal as possible. As used in these Articles of Incorporation, the term "entire Board of Directors" means the directors comprising all three classes into which the Board of Directors has been so divided. Subject to the rights, if any, of the holders of any class of capital stock of the corporation other than common stock then outstanding, any vacancies in the Board of Directors that occur for any reason prior to the expiration of the term of office of the class in which the vacancy occurs, including vacancies that occur by reason of an increase in the number of directors, shall be filled only by the Board of Directors of the corporation, acting by the affirmative vote of a majority of the remaining directors then in office (even if less than a quorum). Page 15 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.) ARTICLE V The corporation shall continue in perpetual existence or until dissolved and liquidated according to law. ARTICLE VI The corporation is formed for the following purposes and shall have the following powers: (a) to distribute and sell automotive aftermarket parts, products, tools, supplies, equipment, and accessories (collectively, "Automotive Products") to all segments of the marketplace, including, without limitation, mechanics, automobile repair shops, automobile dealers, fleet owners, mass and general merchandisers, retail and all other consumers of Automotive Products, and in furtherance thereof, to operate retail stores selling Automotive Products to the public, and to do all things necessary or desirable in furtherance of the foregoing activities; and (b) to do all other things permitted of corporations pursuant to the provisions of The General and Business Corporation Law of Missouri, as amended from time to time. ARTICLE VII A special meeting of the shareholders may be called only by: (i) the Board of Directors pursuant to a resolution adopted by the affirmative vote of a majority of the entire Board of Directors; (ii) the Chief Executive Officer of the corporation; or (iii) the Chief Operating Officer of the corporation. At such special meeting of shareholders, only such business shall be conducted, and only such proposals shall be acted upon, as were specified in the notice thereof. ARTICLE VIII The provisions of Section 351.407 or any other section of The General and Business Corporation Law of Missouri limiting the voting rights of control shares of public corporations that are acquired in a control share acquisition shall not apply to control share acquisitions of shares of the corporation. ARTICLE IX (a) The corporation may indemnify any person (other than a party plaintiff suing on his own behalf or in the right of the corporation) who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit, or proceeding if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Indemnification under this part (a) of Article IX shall be mandatory with respect to any action taken by a person in such person's capacity as a director of this corporation that would otherwise be indemnifiable under this part (a) at the discretion of this corporation. (b) The corporation may indemnify any person (other than a party plaintiff suing on such person's own behalf or in right of the corporation) who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including attorneys' fees, and amounts paid in settlement actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation unless and only to the extent that the court in which the action or suit was brought determines upon application that, despite Page 16 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.) the adjudication of liability and in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. The indemnification permitted under this part (b) of Article IX shall be mandatory with respect to any action taken by a person in such person's capacity as a director of this corporation that would otherwise be indemnifiable under this part (b) at the discretion of the corporation. (c) To the extent that an officer, employee, or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in parts (a) and (b) of this Article IX, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the action, suit, or proceeding. (d) Subject to any applicable court order, any indemnification of a director required under part (a) or part (b) of this Article IX shall be made by the corporation unless a determination is made reasonably and promptly that indemnification of said director is not proper under the circumstances because he has not met the applicable standard of conduct set forth in or established pursuant to this Article IX. Subject to any applicable court order, any indemnification of an officer, employee, or agent of the corporation authorized under part (a) or part (b) of this Article IX shall be made by the corporation only as authorized in a specific case upon a determination that indemnification is proper in the circumstances because such person has met the applicable standard of conduct set forth in or established pursuant to this Article IX. Any such determination with respect to indemnification of a director, officer, employee, or agent shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by majority vote of the shareholders; provided that no such determination shall preclude an action brought in an appropriate court to challenge such determination. (e) Expenses incurred by a person who is or was a director of the corporation in defending a civil or criminal action, suit, or proceeding shall be paid by the corporation in advance of the final disposition of an action, suit, or proceeding, and expenses incurred by a person who is or was an officer, employee, or agent of the corporation in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by or at the direction of the Board of Directors, in either case upon receipt of an undertaking by or on behalf of the director, officer, employee, or agent to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation as authorized in or pursuant to this Article. (f) The indemnification provided by this Article IX shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled, whether under any statute, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. (g) Without limiting the other provisions of this Article IX, the corporation is authorized from time to time, without further action by the shareholders of the corporation, to enter into agreements with any director, officer, employee or agent of the corporation providing such rights of indemnification as the corporation may deem appropriate, up to the maximum extent permitted by law. Any agreement entered into by the corporation with a director may be authorized by the other directors, and such authorization shall not be invalid on the basis that different of similar agreements may have been or may thereafter be entered into with other directors. (h) Except as may otherwise be permitted by law, no person shall be indemnified pursuant to this Article IX (including, without limitation, pursuant to any agreement entered into pursuant to part (g) of this Article IX) from or on account of such person's conduct which is finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct. The corporation may (but need not) adopt a more restrictive standard of conduct with respect to the indemnification of any employee or agent of the corporation. (i)The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or who is or was otherwise serving on behalf or at the request of the corporation as a director, officer, employee, member or agent of another corporation, partnership, joint venture, trust, trade or industry association, or other enterprise (whether incorporated or unincorporated, for-profit or not-for-profit), against any claim, liability or expense asserted against such person and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article IX. Page 17 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.) (j) For the purposes of this Article IX: (i) Any director of the corporation who shall serve as a director, officer, or employee of any other corporation, partnership, joint venture, trust, or other enterprise of which the corporation, directly or indirectly, is or was the owner of 20% or more of either the outstanding equity interests or the outstanding voting stock (or comparable interests), shall be deemed to be so serving at the request of the corporation, unless the Board of Directors of the corporation shall determine otherwise. In all other instances where any person shall serve as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise of which the corporation is or was a shareholder or creditor, or in which it is or was otherwise interested, if it is not otherwise established that such person is or was serving as a director, officer, employee, or agent at the request of the corporation, the Board of Directors of the corporation may determine whether such service is or was at the request of the corporation, and it shall not be necessary to show any actual or prior request for such service. (ii) References to a corporation include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee, or agent of a constituent corporation or is or was serving at the request of a constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise shall stand in the same position under the provisions of this Article IX with respect to the resulting or surviving corporation as such person would if he or she had served the resulting or surviving corporation in the same capacity. (iii) The term "other enterprise" shall include, without limitation, employee benefit plans and voting or taking action with respect to stock or other assets therein; the term "serving at the request of the corporation" shall include, without limitation, any service as a director, officer, employee, or agent of the corporation which imposes duties on or involves services by , a director, officer, employee, or agent with respect to any employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have satisfied any standard of care required by or pursuant to this Article IX in connection with such plan; and the term "fines" shall include, without limitation, any excise taxes assessed on a person with respect to an employee benefit plan and shall also include any damages (including treble damages) and any other civil penalties. (k) Any indemnification rights provided pursuant to this Article IX shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. Notwithstanding any other provision in these Articles of Incorporation, any indemnification rights arising under or granted pursuant to this Article IX shall survive the amendment or repeal of this Article IX with respect to any acts or omissions occurring prior to the effective time of such amendment or repeal and persons to whom such indemnification rights are given shall be entitled to rely upon such indemnification rights with respect to such acts or omissions as a binding contract with the corporation. (l) It is the intention of the corporation to limit the liability to the directors of the corporation, in their capacity as such, whether to the corporation, its shareholders or otherwise, to the fullest extent permitted by law. Consequently, should The General and Business Corporation Law of Missouri or any other applicable law be amended or adopted hereafter so as to permit the elimination or limitation of such liability, the liability of the directors of the corporation shall be so eliminated or limited to the greatest possible extent without the need for amendment of this Article IX or further action on the part of the Board of Directors or shareholders of the corporation. Page 18 O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES Exhibit 3.3 - RESTATED ARTICLES OF INCORPORATION, AS AMENDED (cont.) ARTICLE X The Board of Directors shall have power to adopt, repeal, or amend the By-laws of this corporation and to adopt new or additional By-laws, subject however, to the paramount right of the holders or common stock to limit or divest such power of the Board of Directors, to such extent and for such periods as the holders of common stock at any regular or special meeting shall determine. IN WITNESS WHEREOF, the undersigned, David O'Reilly, Vice President, and Ann Drennan, Secretary, of the corporation, have executed these Restated Articles of Incorporation on behalf of the Corporation this 26th day of February, 1993. O'REILLY AUTOMOTIVE, INC. By: /s/ David O'Reilly ------------------------------------------ Vice President and Chief Executive Officer By: /s/ Ann Drennan ------------------------------------------ Secretary STATE OF MISSOURI ) ) SS. COUNTY OF GREENE ) I, Patricia M. Headley, a notary public, do hereby certify that on this 26th day of February, 1993, personally appeared before me David O'Reilly and Ann Drennan, who being by me first duly sworn, declared that they are the persons who signed the foregoing document as officers of the corporation named therein and the statements therein contained are true. /s/ Patricia M. Headley ----------------------------------------- Notary Public My Commission Expires: January 3, 1995 (Filed and Certificate Issued Mar. 1, 1993) Page 19 EX-27 3 FDS - O'REILLY AUTOMOTIVE, INC.
5 This schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at September 30, 1999 (unaudited) and the Condensed Consolidated Statement of Income for the Nine Months Ended September 30, 1999 (unaudited) and is qualified in its entirety by reference to such financial statements. 0000898173 O'REILLY AUTOMOTIVE, INC. 1000 U. S. Dollars 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1 $2,729 500 55,205 439 288,823 350,302 260,550 51,257 581,346 140,573 0 0 0 253 389,456 581,346 570,912 571,219 330,130 182,679 0 1,277 4,322 54,686 20,901 33,785 0 0 0 33,785 1.41 1.39
EX-99.1 4 CERTAIN RISK FACTORS The following factors could affect our actual results, including revenues, expenses and net income, and could cause them to differ from any forward-looking statements made by or on behalf of us. Competition We compete with a large number of retail and wholesale automotive aftermarket product suppliers. The distribution of automotive aftermarket products is a highly competitive industry, particularly in the more densely populated market areas served by us. Competitors include national and regional automotive parts chains, independently owned parts stores (some of which are associated with national auto parts distributors or associations), automobile dealerships, mass or general merchandise, discount and convenience chains that carry automotive products, independent warehouse distributors and parts stores and national warehouse distributors and associations. Some of our competitors are larger and have greater financial resources than us. No Assurance of Future Growth We believe that our ability to open additional stores at an accelerated rate will be a significant factor in achieving our growth objectives for the future. Our ability to accomplish this growth is dependent, in part, on matters beyond our control, such as weather conditions, zoning and other issues related to new store site development, the availability of qualified management personnel and general business and economic conditions. No assurance can be given that our current growth rate can be maintained. Dependence Upon Key and Other Personnel The success of our company has been largely dependent on the efforts of certain key personnel, including David E. O'Reilly, Lawrence P. O'Reilly, Charles H. O'Reilly, Jr., Rosalie O'Reilly Wooten, Ted F. Wise, and Greg Henslee. The loss of the services of one or more of these individuals could have a material adverse effect on the business and results of operations. Additionally, in order to successfully implement and manage our growth strategy, we will be dependent upon our ability to continue to attract and retain qualified personnel. There can be no assurance that we will be able to continue to attract such personnel. Concentration of Ownership by Management Our executive officers and directors as a group beneficially own a substantial percentage of the outstanding shares of our common stock. These officers and directors have the ability to exercise effective voting control of the company, including the election of all of our directors, and to effectively determine the vote on any matter being voted on by our shareholders, including any merger, sale of assets or other change in control of the company. Page 21 -----END PRIVACY-ENHANCED MESSAGE-----